Judge rules Tucson's bid-preference policy unconstitutional

The Goldwater Institute, a Phoenix-based think tank, filed a lawsuit against the city of Tucson saying the practice was an example of government overreach.

“It’s a victory for fiscal responsibility. It’s a victory for constitutional restraint on government action. And it’s a victory for Tucson taxpayers,” said Goldwater attorney Jon Riches.

Pima County Superior Court judge Gus Aragon’s decision to knock down the Tucson ordinance could have far-reaching implications for other municipalities with similar laws.

“It puts cities throughout the state, and even throughout the country, on notice that that their own bid preferences are susceptible to constitutional challenges,” Riches said.

The City Council will consider an appeal at its Dec. 9, meeting, City Attorney Mike Rankin said.

Riches said Goldwater would base its next move on other cities’ local bid ordinances until Tucson decides to appeal or not.

Tucson adopted its ordinance in June 2012, as a way to jump-start the local economy after the recession.

It allows the city to award contracts to local companies even if their asking price is higher than an out-of-town competitor.

Although Tucson’s charter and state law mandate contracts be awarded to the lowest bidder, the ordinance gets around those prohibitions by granting local companies extra percentage points during the bidding process.

Tucson businesses get an extra 5 percent. Arizona firms outside the Tucson metro area get a 3 percent preference over national competitors. National franchises that have local owners receive 1.5 percent.

Goldwater contended the ordinance discriminated against out-of-town businesses and only succeeded in driving up costs on taxpayers with no direct benefit to the city.

“There’s always this temptation for governments to play favorites and do these things with taxpayer dollars, particularly when the economy is bad,” Riches said. “This is a good opportunity for the courts to remind governments they can’t play favorites with taxpayer dollars.”

Aragon concluded the ordinance violated the Arizona Constitution’s gift clause because it doled out taxpayer dollars to preferred bidders, without “direct consideration in return.”

Since the law was enacted, 60 contracts have gone out to bid. Among those, the local preference ordinance played a factor in the outcome in two of those cases.